Paul Howes (left) and Bill Shorten at the AWU national conference on the Gold Coast in February 2013. Photograph: Dave Hunt/AAP

Opposition leader Bill Shorten has said it is a fantasy to think consensus can be reached with the Abbott government on industrial relations after union leader Paul Howes called for an end to the “blood sport”.

Shorten has dismissed Howes’ suggestions, saying exaggerations are marring both sides of the debate and that prime minister Tony Abbott does not have the slightest interest in sitting down with unions.

“I’m just not going to engage in some fantasy Tony Abbott is going to change his spots,” Shorten told ABC radio on Thursday morning.

“It’s Tony Abbott who introduced to the lexicon of Australian politics goodies and baddies. What the conservatives want is baddies and what they think is, unions are baddies.

“The proposition that we have consensus is a good proposition but the proposition that Tony Abbott’s capable of sitting down with unions? How can you sit down and investigate consensus with organisations Tony Abbott wants to investigate?”

Shorten’s remarks followed a National Press Club speech by Howes – who Shorten described as his “protege” – calling on business and unions to work together on a “grand compact”, a long-term industrial relations system that did not face an overhaul each time the government changed.

“A bitter all-out war between labour and capital will not end with productivity gains,” Howes said on Wednesday.

Abbott characterised Howes’s speech as a direct attack on Shorten and said the concept of a grand compact was “very 1980s”.

“I certainly think he’s pulled the rug out from underneath Bill Shorten’s scare campaign. That was a very powerful assault on everything Bill Shorten has been doing for the past few months," he said.

Abbott again alluded to a royal commission into unions.

“What we said pre-election was there would be a judicial inquiry into union slush funds. We have had further revelations about more widespread corruption. We are committed to a judicial inquiry into union slush funds, whether it should have a broader remit, we are looking at that,” he said.

While campaigning for Bill Glasson in Kevin Rudd’s former Brisbane seat of Griffith, Abbott said there was “much good” in Howes’s speech.

“That said, I think that what we need to see is managers and workers in partnership at the workplace. That’s what we need to see,” he said.

“We need to see a very high level of personal engagement between workers and managers at every individual business. What I don’t particularly want to see is some kind of big government, big business, big unions council which somehow dictates to everyone,” he said.

“We all know that’s not democracy, that’s corporatism.”

Abbott said he supported “grassroots partnerships”.

Glasson was also asked about the speech and described it as “sensible and sound”.

Shorten, a former head of the Australian Workers’ Union, said he had always been a man of the middle ground when it came to industrial relations and politics but he did not think the Abbott government was interested in anything other than attacking unions and employees.

When Shorten was asked if his remark was an example of the sort of “overreach” Howes said both sides in industrial relations debates were guilty of, he replied: “I can’t seriously sit here in this interview and say to you I think there is a remote chance of Tony Abbott and his hardline rightwing government are interested in co-operation.

“How can you sit down and form an accord with a series of organisations that you want to have a royal commission into? It’s not real.”

When asked if Howes had undermined Shorten with the speech, the opposition leader replied he believed union leaders were entitled to their opinion before adding: “That’s not Tony Abbott’s Australia.”

Howes stopped short of endorsing a royal commission into unions but said every time the Coalition was in power, business saw it as an opportunity to change laws, and unions thought the same thing whenever Labor won government.

“Some will tell you that our industrial relations system is dragging us down, and I won’t be popular amongst my friends in the labour movement for saying this, but I agree. However, I don’t want to call the lawyers in so they can start pulling apart the legislation,” he said.

Howes said the key to productivity and competitiveness was not another Howard-style WorkChoices or indeed another Rudd/Gillard-style Fair Work Act, but to step back and recognise the concerning “seesaw pattern of industrial relations in this country”.